A recent episode of Joe Rogan’s podcast further illustrates that besides finally turning profitable, Twitter Inc. (TWTR, Financial), with over 330 million users, has solidified itself as one of the most important platforms on the internet, espeically in terms of public engagement. While its user base does lag some of its competitors, like Facebook (FB, Financial), Tumblr and TikTok, Twitter remains one of the most used real-time content distribution services, and perhaps the best regarded for political discourse and free speech. That makes it one of the most valuable assets, regardless of its current market capitalization.
When compared to the two other public social media networks based in the U.S. - Facebook and Snap (SNAP, Financial) - Twitter looks potentially undervalued. Facebook is still the industry leader and will likely remain there as long as social media is a profit center. Facebook probably deserves to trade at higher price-book and price-sales multiples than Twitter. Snap, on the other hand, does not. If priced on par with Snap’s multiples, Twitter would trade in the $45 range, close to where the stock was last summer and still lower than its 2014 high of $64.50, a price that, given some time, it should see again.
The company has been pushing further into video content, adding thousands of hours of live streaming and sports highlights. Some of these partnerships include game clips from the UEFA Champions League and interviews with Formula One drivers. More recently, management has been working to expand its premium video content across the Asia Pacific. In fact, Twitter has done more than 50 deals with providers, helping it increase video views 81% during 2018. As such, it is now poised to generate even better financial results in 2019 and 2020, with earnings expected to come in north of $1 per share in each of the next two years.
More importantly, Twitter CEO Jack Dorsey has declined to take a salary and stock award for years, tying his compensation to the rise and fall of the platform based on the company’s results. He’s still the largest individual shareholder with upward of 20 million shares. Of course, he does run two companies, Twitter and Square (SQ), so having a net worth of $5 billion helps. But knowing the CEO is not driving up expenses to suit their own personal financial needs is generally good news. The next year will be a big test to see if profits were a one-time fluke or something it could start building upon.
Disclosure: I am not long or short any stocks mentioned in this article.
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